Sunday, December 27, 2015

I hope that
you and your family are having a happy holiday season.I wanted your thoughts on a discussion that
SF and I were having last week on GF’s ‘The Exporting Crisis.’It seems many of the top exporting nations
are worried about the currency ‘race to the bottom’.Countries like South Korea and Germany are
extremely efficient exporters – to the tune of exporting about half of their
GDP. And at one time this ‘export’ ability
was an asset, but now customers are holding exporters hostage. You’ve no doubt heard the saying: “If I owe
you $1 – it’s MY problem, if I owe you $10m – it’s YOUR problem.”Currently customer problems have become the exporting
country’s problems – because an exporting country’s economic, political, and
social lives depend upon their ability to continue to export.

Recently, the
lack of appetite for Chinese goods (specifically in the U.S.) became an
exporting crisis for China. That, in
turn, created an exporting crisis for those fueling China’s economic growth,
including oil and other raw material exporters. China had assumed that the U.S. and European
economies would recover, and would resume importing Chinese goods.South Korea assumed that China would resume
prior levels of production, and would resume importing their goods. Even now, the world is assuming that the
collapse of oil prices and of secondary exporters like South Korea will recover
and return to previous levels.

Putting
these assumptions aside, there are additional, critical exporting and currency
related issues.Germany (for example) is
the world’s fourth largest economy, exporting just under 50% of its GDP.

Germany
needs to maintain the European free trade zone at all cost, and is therefore
leading the Euro lower in the ‘currency devaluation race’.Germany is the most effective economy in Europe,
and also the most insecure.It is
incredibly vulnerable to any reduced demand for its products.Its prosperity and full employment depend upon
its export system. However in a ‘no or
low growth’ world, the appetite for exports has become less than robust. There are enormous pressures on German exporters
to seek new markets.Now it becomes even
clearer why the Eurozone/Germany needs to continue to devalue its
currency.A cheaper Euro allows German
suppliers to be the ‘low cost provider’ and to more easily penetrate new
markets.

In contrast,
the U.S. only exports 13.5% of its GDP, but is the producer of almost
one-fourth of the world’s GDP. The U.S.
has relatively high domestic consumption, and therefore relatively limited exposure
to foreign dysfunctions.

It comes
down to the exporting economies being extremely vulnerable to their existing
customers during ‘no or low growth’ environments.Europe and Asia (due to their natural
‘exporting’ nature) are currently in chaos.So insulating ourselves from them economically via an interest rate hike
was a good thing.Also the ‘export-based
economies’ are beginning to experience lower-priced competition from East
African countries and from some neglected parts of Asia.These countries are developing production capabilities
in garments and cell phones, and are proving to be worthy competitors to the
Europeans and Asians.

I worry that
we are entering an era of European and Asian economic and social instability –
where no amount of QE or currency devaluation can save their economies from
real export competition and reduced consumption.History tells us that the only solution for a
downturn in an export-based economy – is war.The only solace is: “The more violent the storm, the quicker it passes.”

The Market...

Factually:

-Existing home
sales fell 10.5% in November – making it (arguably) the largest November drop
ever.

-If you chart the
S&P for the past 6 months, you will see is a series of lower highs attained
on various bounces. After the August
lows and then the September retest of those lows, we charged higher – running out
of steam at 2109. Then we pulled back, and another push higher to 2102. Then we faded again, followed by another run-up
to 2091. Then we plunged, only to be followed by a snap back rally to 2073. Each high number has come up slightly shy of
the previous one: 2109 to 2102 to 2091 to 2073. That's not a tremendously
bullish omen.

We just came through a
powerful 3-day bounce, followed by a pause on Thursday. So what’s next?We are in the time slot for the ‘Santa Claus
Rally’, and many are hopeful that the next 8 trading days will bring us back to
the year's highs. It certainly
could.After all, markets no longer
require fundamentals to go higher.

We're coming into the last
4 trading days of the year, and two out of my three predictions have come true.

1.China was accepted into the IMF's SDR reserve
currency basket.

2.The FED did NOT do any more QE, but did increase
rates.

3.And, in May I said that the market had ‘topped’ and
without any new stimulus or QE, we would not see new highs this year. So far so good.

To see new highs by
yearend, the S&P needs another 70+ points and the DOW needs 760 points. And even for these banksters, 760 points in 4
sessions is a stretch.

For 2016, I’m hearing
rumblings that Central Banks would like to do a ‘Helicopter Drop’. What’s a ‘Helicopter Drop’?The idea is that when all else fails to stimulate
an economy, Central Banks will find ways to get cash directly into consumers
pockets – bypassing the idea of ‘trickle down’.For example, what if you woke up Monday morning to a ‘Treasury Tax
Rebate’ where $10,000 dollars had been wired into everyone’s bank account.Some might save it, but the U.S. (being a
consumption society) would see most people busting down doors to get to the
malls and car dealers as quickly as possible.Instantly ‘Business would be Boomin’, and for a short period of time the
surge in the economy would be epic.

This is exactly what's
being talked about as a serious suggestion for the Eurozone, and eventually the
U.S. Remember, exporters need consumers
to survive.But can you imagine the
idiocy of such a decision? First of all,
the money would be printed out of thin air, and therefore the value of that
currency would be crashing. Secondly, all
of that printed money would end up on some ledger as being more debt that could
NEVER be repaid.And finally, think of the
shortsighted nature of that decision.Just
like the trillions in QE over the past 6 years has ‘drawn forward’ demand, and now
that QE is dwindling – the demand is drying up along with it.The same thing would happen with a ‘Helicopter
Drop’.Uncle Sam would give every
citizen $10K to spend. Millions would rush
out and buy every gadget they ever wanted. The gadget suppliers would ramp up production
to meet demand. The suppliers of the raw
materials to make the gadgets would be hiring, and everyone would be happy –
until the last person spends his $10K.

Then instantly demand goes
back to where it was BEFORE the $10K hit everyone's pockets. The effect would be over. All those extra miners, refiners, assemblers,
trains etc. would sit idle (as they are now). Refresh my memory, but wasn’t this what QE was
supposed to do – jump-start a slowing economy?I fail to comprehend the idea that doing MORE of something that FAILED
is going to give us a better outcome. From my view (in the cheap seats), we would
just fail BIGGER.But that's the very idea
that Draghi is trying to get accepted by other Central Banks and our FED – over
in the Eurozone.

It’s too early for my 2016
outlook; but you can bet that it is going to be a fairly ‘ugly’ read. Big changes are coming too quickly for
economies to pro-act.For example, consider
the job market. Just two years ago
petro-engineers were in high demand – writing their own paychecks.The shale oil companies were competing against
each other for their services. Now, many
are laid off, and more will be hitting the unemployment lines as sub $40 oil
will put a halt to many of those operations.With that in mind, please be careful out there.It's a very strange time in the markets, in
politics, and in the world.Try and be
safe.

Tips:

I am looking at:

-Allergan (AGN) has a deal with Pfizer (PFE) that is
heating up. AGN is potentially range bound to the upside – so we may be able to do a
Diagonal or a Broken-Wing Butterfly.

-Restoration
Hardware (RH) is setting up nicely to the upside for a January or February
Diagonal or Broken-Wing Butterfly.

-Other names (like
the above) that are setting up to the upside are: IBB, AAPL, CRM, COST, LMT and
NKE.

-Boston Beer
(SAM) for a JAN, 185 / 190 to 220 / 230 Iron Condor,

-Polaris (PII)
for a JAN, 75 / 80 to 95 / 100 Iron Condor, and

-Cracker Barrel
(CBRL) for a JAN, 115 / 120 Put Credit Spread.

I am:

-Long various mining stocks: AG, AUY, EGO, GFI, IAG, and FFMGF,

-Long an oil supplier: REN @ $0.56, and

-SPX – Jan – Iron Condor – 1945 / 1950 to 2125 / 2130.

To
follow me on Twitter.com and on StockTwits.com
to get my daily thoughts and trades – my handle is: taylorpamm.

Please
be safe out there!

Disclaimer:

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author,
R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of his thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Views
expressed are provided for information purposes only and should not be construed
in any way as an offer, an endorsement, or inducement to invest and is not in
any way a testimony of, or associated with Mr. Culbertson's other firms or
associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

Sunday, December 20, 2015

In 1971, when President
Nixon closed the ‘gold window’, the world changed forever as we passed total
control of the price and value of money over to the Central Banks.During the past 20 years (with our ‘free
money’ policy) we have been witness to the single, largest credit expansion in
history.During this time the world’s
Central Banks have increased their balance sheets by an insane 900%.But even the wildest of credit binges reaches
a saturation point. That point is when
the simple, bare minimum credit card payment – takes every penny of income that
comes into a household.Even though that
same household has perfect credit, it cannot take on any more debt without
increasing its income.That is the situation
that the entire world is in today. Our
world is saturated with debt to the point that the world cannot take on one
more payment without increasing its income.

This happened because over
the past 25 years, incomes have remained stagnant while prices for goods and
services have continued to rise.For
example, the median household income in 1989 was $56k per year – exactly the
same as it is today.However, in 1989 housing
was over 50% cheaper than it is today.In
1989 the average cost of a car was $16,000, versus the $33,560 that it costs
today.Consumers and nations are ‘tapped
out’.China has over-built for decades trying
to meet demand projections that were based upon a never-ending debt cycle.With ‘tapped out’ consumers and nations –
those same Chinese plants are now idle, their mines are closed, and their
warehouses are stuffed to the rafters with rotting inventory.

So Ms. Yellen, after
keeping rates at zero for 78 months, adding trillions to our nation’s balance
sheet, and NOT delivering a viable recovery – your economic remedy ‘this week’ was
to RAISE RATES.Really?You continue tell us that your decision was
‘data dependent’, but the data stinks.This
week the Baltic Dry Index (a measure of global shipping) hit another record
low, while the Philly Fed report came in at a -5.9% showing ‘contraction’.So if your decision was NOT data dependent, then
what is it? Was it this:“Wells Fargo Bank increased its prime
lending rate today.That will affect:
all Credit Card APRs, Home Equity lines, etc.But Wells Fargo will NOT increase the interest rate that it pays out on
any of its deposits.”Ah-hah, so
this rate hike will allow banks to charge more for credit, but won't force them
to pay out any more on deposits. So this
rate hike is all about taking care of your criminal banksters.

But Ms. Yellen, how are
you going to protect your banksters when the world moves to a new ‘global
reserve’ currency?Over the next several
years (I think) the U.S. dollar will be replaced as the ‘global reserve
currency’ by a basket of currencies called SDRs.Just two weeks ago the Chinese Yuan was
included in that same SDR basket. When
the U.S. dollar is removed from its ‘global reserve’ status, there will be a
‘reset’.There will still be U.S.
dollars, but other nations will not be forced to acquire them in order to trade
for each other’s goods and services.Instead,
nations will work through exchanging their Rubles and Lira for SDRs.

Ms. Yellen,
in your statement following the rate increase, you said that you expect to
raise rates to 1.5% by the end of 2016, to 2.5% by late 2017, and to historical
averages of 3.5% or so by 2018.You also
said that it rarely makes sense to raise interest rates when inflation is as
weak as it is.Well, with Europe (at
best) treading water, China slowing, and the Emerging markets really feeling
the pressures of a stronger dollar – how will those rate increases ever happen
under what can only be described as deflationary conditions?

And I must
assume that you’re ok with a weakening housing market, and (with fewer stock
buybacks) a weaker stock market over the coming year.Additionally over the next year, with all
Central Banks taking a more active role in the markets - I expect you’re ok
with a higher frequency of market corrections and downside volatility than we’ve
seen in the past 3 to 4 years.

Ms. Yellen,
here’s hoping that a lot of our mothers haven’t rented out their son’s and
daughter’s old rooms.

The Market...

On Wednesday, the FED
announced their first rate hike in a decade. The market originally appeared to rejoice over
it, and sent the DOW up over 200 points. But when reviewing the early part of the week,
that Monday through Wednesday romp higher seemed to be manufactured. It felt more like Central Bankers trying to
lift the markets ahead of the rate hike, and create 'headroom’ for any negative
reaction.And sure enough, on Thursday we
gave back every penny of Wednesday's big move higher plus a bit more. And on Friday a horrific bout of selling hit
that sent the DOW down 370 points, and the S&P coughing up 36 points to the
downside.

What happened to the Santa
Claus Rally? Wasn't everyone told that
Santa would show up, and bring a big yearend rally? Who didn’t get the memo?Did Santa get smacked in the head with too
much economic reality such as: lower retail sales, all time lows in the Baltic Dry
Shipping index, month after month of negative regional FED reports, and a RATE
HIKE – for starters?

So with only 8 trading
days left in the year, where does this leave things?I said months ago that without some new form
of ‘stimulus' we would NOT get over the May highs, and now that is certain. But, that's not to say that the banksters might
not manufacture another snap back rally – they might. But all in all, there's zero fundamental
reason for the markets to go higher. If they
do, it's the Central Banks themselves making it happen.

Now if the S&P loses
2000 – that’s a bad sign. If the S&P
then loses 1993, it's a fair bet we will be visiting the August (1860) lows in
the near future. Granted that would be
unusual for this time of the year, but that's what I see. If they hold the line at 2000, we could see a
bounce higher.But for those of you
wishing for a shot at the all time highs – you’re out of luck for 2015.

Please be careful out
there. It's a very strange time in the
markets, in politics, and in the world. Try and be safe.

Tips:

I am looking for:

-SPX (@ 2,005) to
test 1950 and then the 1900 level. If we
break that, we could retest the 1,860 August lows,

-NDX (@ 4,514) to
test 4500 and then the 4400 level.

-Apple (AAPL) and
Costco (COST) – I would like to do ‘Iron Condors’ on them because I fear the
selling is over. But right now I’m
unwilling to catch a falling knife as their prices continue to fall,

-SalesForce (CRM)
– I would like to do a ‘Calendar Spread’ as volatility continues to rise into
earnings.

To
follow me on Twitter.com and on StockTwits.com
to get my daily thoughts and trades – my handle is: taylorpamm.

Please
be safe out there!

Disclaimer:

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author,
R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of his thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Views
expressed are provided for information purposes only and should not be
construed in any way as an offer, an endorsement, or inducement to invest and
is not in any way a testimony of, or associated with Mr. Culbertson's other
firms or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

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